The Political Economy of Malaysia’s Migrant Worker Business

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Four companies. One job. Billions at stake.

Presently, we have a substantial number of migrant workers in the country – 2.1 million registered ones and another two to three million unregistered ones. And an additional 1.5 million from Bangladesh are on the cards.

How migrant workers contribute to the national economy is a matter definitely worth a thorough survey of its own. Here, I would like to discuss the lucrative business of importing foreign workers – what I call “the migrant worker business”, and in that way take issue with the government’s migrant workers policy. While there are many smaller agencies acting as middlemen and service providers, five major players dominate this highly profitable industry.

Billions to the Government

The first major player is the government of Malaysia. With an annual levy ranging from RM410 to RM1,850 per worker, it is estimated that the government collects anywhere between RM861mil and RM1.8bil in income from this source1.

This year, the levy will be doubled, and Deputy Prime Minister-cum-Home Minister Zahid Hamidi has already announced that the government revenues from this channel will now hit RM2.5bil2.

On top of that are a processing fee of RM125 and a permit fee of RM60. With these, we are looking at another RM400mil. And then there are the visa charges, which vary with the workers’ country of origin. If we merely take the lowest visa charges of RM13 (for Vietnamese nationals), that will give us another income of RM27.3mil.

In short, the migrant worker business has been giving the federal government about RM2bil in revenue annually, and with the levy increase, this will now rise to RM3bil.

The Big Four

Then there are at least four private companies that have major roles in the business of importing migrant workers. They are: NERS, MyEg, Synerflux and Fomema.

The first three companies have roles that are often in conflict with each other. NERS, for example, was awarded a 12-year contract in 2011 to record and monitor the immigration of foreigners to Malaysia as well as issue the Visit Pass (Temporary Employment, or PLKS). For each PLKS issued, the government would pay NERS RM50. According to the Federal Estimates (i.e. Federal Budget), the Home Ministry (Immigration Department) has to pay

NERS the following amount:

Syerleena Abdul Rashid

This means that the company receives an average of RM90mil a year from the government in 2013-2016. This will go on until 2023. And then in January 2015, the federal government announced that MyEG had been awarded the contract as the sole agent to renew PLKS for migrant workers. For this service, MyEG will collect RM35 from the government for each transaction done.

This means the company can potentially draw a revenue of about RM74mil a year for doing what NERS was originally paid to do: issuing PLKS. On top of that, MyEG is expected to pocket nearly RM300mil in processing fees before remitting it to the Immigration Department.

Almost immediately after the appointment, MyEG was investigated by the Malaysia Competition Commission (MyCC) for anti-competition behaviour in relation to the PLKS renewal contract. However, before the investigation by MyCC could be concluded, MyEG was again awarded a new contract by the federal government – this time to register undocumented foreign workers. This new deal was made in September 2015, and the work began in February this year.

The MyCC finished its investigation only on October 6, 2015, a month after the new contract was given, and found MyEG guilty under Section 10 of the Competition Act 20103.

According to one estimate, a conservative assumption of an additional one million unregistered migrant workers using MyEG’s service will “boost the company’s revenue by RM100 annually or RM47mil in net profit4”.

However, the MyEG website states that an applicant has to pay RM1,134.52 for each registration of undocumented migrant workers5. With a conservative projection of one million registrations, MyEG is set to rake in RM1.1bil from the exercise.

A third company is set to enter this rewarding business. In a parliamentary reply made in October 2015, the Home Minister revealed that Synerflux, a company allegedly owned by former Home Minister Azmi Khalid, will be appointed to manage 1.5 million incoming Bangladeshi workers6.

The Home Minister later altered his statement to say that Synerflux was only shortlisted and not yet appointed. Bangladeshi media however reported warnings from the country’s High Commission in KL to Dhaka against the “online system supervised by a (Malaysian) company…” with the media report naming Synerflux as the said company7.

We do not know its fees structure as yet, but based on those of the two companies above, we can estimate that the potential revenue for this third company will be, at a minimum, in the region of RM50mil-RM100mil per annum. It is also highly possible that the company will take advantage of its monopolistic position and impose a high processing fee reaching RM1,000 per migrant worker. We are looking at a potential revenue here of RM1.5bil.

Karen Lai

The fourth private company with a major stake in this migrant workers business is the Foreign Workers’ Medical Examination Monitoring Agency (Fomema). Set up in 1996, it was part of the government’s programme to ensure independent and credible health screening of incoming migrant workers. The agency was later privatised and is now owned by Unitab. The company screens 1.2 million migrant workers every year8. Each screening costs RM180 and RM190 each for man and woman respectively. This brings Fomema’s income to about RM216mil annually.

Hence, just among the Big Four, importing migrant workers is already a whopping RM3bil business.

Syerleena Abdul Rashid

The Big Four are profiting merely by being officially appointed middlemen.

As mentioned earlier, there are many smaller agencies and service providers in this multibillion ringgit industry, but the above four companies are the biggest private sector players, each having the juiciest pieces cut out for them by the federal government.

All four companies were or will be awarded their respective contracts via direct negotiation, and at least three of them have direct connections to Umno leaders.

Shockingly, NERS, MyEG and Synerflux are being paid big money for almost duplicating each other’s jobs. Why are these companies allowed to pocket hundreds of millions for doing essentially the same thing which one entity can sufficiently do? If the government is already paying hundreds of millions to NERS, for example, to issue PLKS, why is it also giving MyEG hundreds of millions to do the renewal when NERS can be tasked to do the same thing?

Besides, why should these companies even be appointed as mega middlemen to earn easy money when the Immigration Department itself can actually perform the tasks?

Karen Lai

In fact, during the April 2015 parliament sitting, former Deputy Home Minister Wan Junaidi Tuanku Jaafar pledged that the government will set up an agency under the Modernisation and Management Planning Unit (MAMPU) to manage foreign workers permits.

As it is, the Immigration Department is already providing online application services including that for Professional Visit Pass (PVP), foreign maids, student pass, residence pass and others.

Hence, the Big Four are making money off services which government departments should and can easily provide. This is classic rent-seeking at its best.

Migrant Workers: A Means or an End?

To be sure, no thinking person will say that Malaysia does not need migrant workers. Malaysia must position itself to tap into global human resources, which include low or semi-skilled workers. However, it is clear that the current situation needs to be reformed; the intake of migrant workers is disorganised, haphazard and random.

But based on this simple survey of the industry, it is quite apparent why the situation is such.

To the government, the importing of migrant workers is not so much in support of local enterprises as it is a business in itself. The government and its cronies are making billions of ringgit from this business, and it makes sense for them to keep on introducing policies to sustain the industry – new contractors, new intakes, new tariffs and new laws – no matter what the effect on society and the economy may be. We cannot continue as we do now, but to call for a stop to migrant workers is also irrational.

What we desperately need is a thorough national human resource blueprint – one that maps out our own talents, recognises the needs of industry, identifies gaps and then lays out a strategic plan to maximise the use of our workforce, both Malaysians and migrant workers. The blueprint must be able to deal with various issues, including the high unemployment and underemployment of young Malaysians, the low women labour force participation rate, post-retirement workers as well as the utilisation of the global talent pool.

Without such guidance, we end up in the current situation where the government claims, on one hand, that it is bringing in more migrant workers to satisfy the demand of employers while the industry responds, on the other hand, that the government needs to ensure that there are enough jobs available for these incoming workers.

Clearly, the interest has not been to match labour supply to local demand, but rather to profit from the hopes of the poor.

1 www.moha.gov.my/index.php/en/bahagian-padasar- dasar-semasa/kadar-bayaran-levi-visa-plks

2 www.themalaysianinsider.com/malaysia/article/ rm2.5-billion-expected-from-new-foreign-workerslevy- rate-system-says-zahid

3 http://pardocs.sinarproject.org/documents/2015- october-november-parliamentary-session/oralquestions- soalan-lisan/2015-11-18-parliamentaryreplies/ soalan-37.pdf/view

4 www.thestar.com.my/business/businessnews/ 2015/09/26/exit-or-stay-with-myeg/

5 https://app1.myeg.com.my/eservices/Rehiring_ FAQ_EN.pdf

6 http://pardocs.sinarproject.org/documents/2015- october-november-parliamentary-session/oralquestions- soalan-lisan/2015-10-19-parliamentaryreplies/ soalan-34.pdf/view

7 http://bangladeshchronicle.net/2016/01/ bangladesh-mission-warns-against-monopoly-ofworkers- by-malaysian-company/

8 www.thesundaily.my/news/1655654

 

Steven Sim is the MP for Bukit Mertajam. He is the deputy spokesperson of the DAP Parliamentary Committee for Human Resources. He is also a board member of the Penang Institute.



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